I would like to know which is better? Shares or Mutual funds?

I am very much confused between these two. As I want to earm little profit out of my savings I wolud like to know which is safer and more profitable or else even if a bit risky, which is better?
If shares are better which company shall I opt? If MF is better then which bank?

11 Replies to “I would like to know which is better? Shares or Mutual funds?”

This past Christmas, I was at a party, and a man who’s about 10 years older than I am asked me what mutual funds I invested in. My reply was “None. I rarely invest in mutual funds because of the lack of transparency. I don’t know their fees. And I know there are hidden expenses they don’t need to disclose to investors.”http://finance.yahoo.com/expert/article/richricher/6720

Basic thing is TIME!
If you have time and willing to invest in lots of reading and analyzing the companies, its best to go for direct investment in stocks.
But if you dont have time, go for MFs.
Disadvantages of MFs-
1 – They cant invest much in small / mid cap company
2 – Cut-throat competition leads to continuous churning of their portfolio, so they cant go for undervalued stocks and cant stay invested for long term.

I can not tell you which is better. That is a very subjective matter. Here are the differences though.

Mutual funds contain a large number of different investments so the specific risk is less. You are not putting all of your money into a single or a very few specific stocks.

But mutual funds charge annually a management fee that eats into your gross return. Many also tend to buy and sell frequently which can impact your tax bill detrimentally.

Buying stock in specific companies means you are subject to more specific risk, but you do not incur annual management costs, you do control when you buy and sell. And generally you learn more about investing. You also can receive dividends if you invest in companies that pay dividends. The dividend rates from investing in dividend paying companies is much higher than investing in a mutual fund that invests in dividend paying companies because there is not management fee.

Some mutual funds do have a very good track record of returns and some stocks do too. Some mutual funds have a very poor record of returns and some stocks do also. Some even go bankrupt.

If you can analyse few stocks go in for Stock Market. (High risk High Return )
If you are relative new, and needs an expert to look after your investment, at minimal cost, please choose MF. They are relatively less risky and your investments are well regulated by SEBI (Market regulator).

Shares will give you better returns as compared to mutual funds. But to invest in shares you need to first understand the behavior of shares and its fundamentals. This is not easy, it comes only with experience and patient study of market. Lack of knowledge of stocks makes stock investing very risky. This is the reason why it is always recommended that lay investors should invest in shares via mutual fund route.
In general, a well informed and knowledgeable investor can earn interest of 15% to 18% returns by investing in stocks.

Mutual fund companies invests in stocks on your behalf. Mutual fund managers are well trained in the process of stock investing. They have a good knowledge of managing money. Their decision of buying and selling stocks are based on research work rather than speculation.
In general, a lay investor can earn interest of 12% to 15% returns by investing in stocks via mutual fund route.